Blair set to earn £40m after emotional farewell

Tony Blair is waving goodbye to Downing Street - and hello to a staggering £40million from book deals and lecture tours.

The shape of his future emerged as he bade an emotional farewell to loyal supporters in his Sedgefield constituency, remaining the showman to the end.

The ex-premier will create a charitable foundation to forge "greater understanding" between faiths and help bring Israelis and Palestinians together.

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Don't you just love me! Tony Blair milking the applause following his farewell speech in Trimdon Labour Club

But as one of the architects of the Iraq war, his decision to position himself as a peace campaigner in the region will surprise many.

As an ex-prime minister, Mr Blair will travel the world promoting his new cause. But he will make sure there is plenty of space in his diary for speaking engagements at up to £125,000 a time.

Cherie Blair, repeatedly accused of cashing in on her husband's name with lucrative speaking tours, is likely to "piggy back" on his bankability by arranging her own lecture dates to coincide with his schedule.

The international speaking circuit which will provide the Blairs with the long-term income to top up the Prime Minister's £117,500 a year pension and £90,000 annual public service' allowance which are his for life.

Mr Blair's thirst for peace in the Middle East is said to have been reinvigorated by the success of restoring power-sharing to Northern Ireland.

He wants his foundation to concentrate on the world's most intractable conflict, rather than Africa, because there would be too much of an overlap with his old friend Bill Clinton's work and the Gates Foundation of Microsoft billionaire Bill Gates and his wife Melinda.

Surprise guest: A 'constituent' from South London

On Thursday Mr Blair brought the curtain down on his 13 years as Labour leader - and the longest goodbye in political history - with a grudging apology and a tear-stained plea for understanding.

Pursued by the horrors of Iraq, one of the most remarkable politicians of his age was reduced to begging for his place in history, mixing sentimentality with defiance.

He offered the British people "apologies to you for the times I have fallen short" but insisted: "Hand on heart, I did what I thought was right".

Yet even as he spoke in the Trimdon Labour Club, where his political career began in 1983, his trademark "New Labour New Britain" logo was being airbrushed from the party website.

It was replaced by a white rose on a purple background, recalling the logo used by Neil Kinnock. A party spokesman denied, however, that this heralded a return to more traditional policies, while Gordon Brown said he knew nothing about the switch.

Family support: Kathryn Blair

Hounded out of office by the party he led to an unprecedented three general election victories, Mr Blair tried to make a virtue of his departure, saying: "Sometimes the only way you conquer the pull of power is to set it down." But he could not get around the issue of Iraq.

He insisted it was right to remove Saddam but admitted: "The blowback has been fierce, unrelenting and costly.

"For many it can't be worth it. For me, I think we must see it through.

"The terrorists who threaten us here and around the world will never give up if we give up. It is a test of wills and we can't fail."

Mr Blair's announcement that he will stand down as Prime Minister on June 27 triggered a six-week march to Gordon Brown's coronation at a Labour conference on June 24.

The Chancellor praised his old rival, calling his achievements "unique, unprecedented and enduring".

He added: "His enduring legacy will be that he built better public services, a strong economy, that Britain's reputation in the world is stronger than ever and that at all times he tried to do the right thing."

Last kiss: Mr Blair pauses before returning to Downing Street

On Friday Mr Brown will launch what he sees as a rescue mission for a party facing defeat. He will try to draw a line under sleaze and spin by offering himself as a more serious, committed politician.

Mr Blair will spend the last 47 days of his premiership on a frenetic round of foreign

visits and domestic initiatives designed to show he still has something to do.

Assurances from his friends that he will stay on as a backbencher could not dispel speculation that he will quit the Commons in July and concentrate on earning what some estimate could be £40million in the next four years.

Mr Blair's wife Cherie and daughter Kathryn were in the audience in his Sedgefield constituency.

So, it emerged, were dozens of party workers bussed in by aides keeping up their stage management to the very end. They included a black woman, embraced by Mr Blair, who was later identified as a party member from South London.

The Premier tried to put the best gloss on his years at No 10 but conceded that expectations had been "too high probably" in 1997 - a back-handed admission that Labour had failed to deliver.

"And now, in 2007, you can easily point to the challenges or the things that are wrong or the grievances that fester," he said.

But he insisted: "There is only one Government since 1945 that can say all of the following: more jobs, fewer unemployed, better health and education results, lower crime, and economic growth in every quarter. Only one Government - this one."

And in a patriotic purple passage redolent of the Bush White House to which he became so attached, he declared: "This country is a blessed nation. The British are special. The world knows it. In our innermost thoughts, we know it.

"This is the greatest nation on Earth, so it has been an honour to serve it."

He ended: "I give my thanks to you, the British people, for the times that I have succeeded and my apologies to you for the times I have fallen short. But good luck."

As reaction poured in, it was clear that Iraq was the defining issue.

Lord Kinnock said it was a tragedy Mr Blair's achievements would be "certainly shadowed, probably, in the short term, obscured" by the war. But Tory leader David Cameron said Mr Blair's years had been a "big disappointment" and left a legacy of "dashed hopes".

He said: "When the Prime Minister spoke about hopes that have been disappointed, that was putting it mildly.

"Many people will look back on the last ten years of dashed hopes and big disappointments, of so much promised and so little delivered."

Deputy Prime Minister John Prescott also announced yesterday that he was standing down, sparking a scramble among the six contenders to replace him.

World reaction to Mr Blair's announcement was mixed.

President Bush said: "I will miss Tony Blair. He is a political figure who is capable of thinking over the horizon.

"I have found him to be a man who's kept his word, which is sometimes rare in the political circles I run in." German chancellor-Angela Merkel spoke of her regret. But an Iraqi government spokesman said that while Mr Blair "stood courageously next to President George Bush to end the misery of the Iraqi people" the aftermath of the war could have been handled better.